Mathematics of FinanceMCQMTP Sep 24 Series IIQuestion 1597 of 512
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The value of the present value of a sequence of payments of Rs 80\displaystyle Rs \displaystyle \text{Rs }80 made at the end of each 6\displaystyle 6 months and continuity forever, if money is worth 4%\displaystyle 4\% compounded semi-annually is

Select Your Answer (Keyboard: A, B, C, D)
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Correct Answer

✅ Option a — Rs 4,000\displaystyle \text{Rs }4,000

All Options:

  • ARs 4,000\displaystyle \text{Rs }4,000
  • BRs 5,000\displaystyle \text{Rs }5,000
  • CRs 3,000\displaystyle \text{Rs }3,000
  • DNone of these

Detailed Solution & Explanation

The present value (PV\displaystyle PV) of a perpetuity paid semi-annually is: PV=AiPV = Ai\displaystyle \frac{A}{i} Given: * Semi-annual payment (A\displaystyle A) = $80$ * Nominal interest rate = 4%\displaystyle 4\% p.a. compounded semi-annually, so periodic semi-annual interest rate i=4%2=2%=0.02\displaystyle i = 4%2=2\displaystyle \frac{4\%}{2} = 2\% = 0.02 Substituting the values: PV=800.02=4,000PV = 800.02=4\displaystyle \frac{80}{0.02} = 4,000 Hence, **Option A** is the correct answer.

About This Chapter: Mathematics of Finance

Paper

Paper 3: Quantitative Aptitude

Weightage

12-16 Marks

Key Topics

Simple & Compound Interest, Annuity, Perpetuity

The most important mathematical chapter in the entire syllabus. It covers Simple Interest (SI), Compound Interest (CI), Nominal vs Effective rates, Present and Future Value, Annuities (Ordinary and Due), Sinking Funds, and Perpetuities. The concepts learned here are applied heavily in CA Intermediate and Final.

View Official ICAI Syllabus

Exam Strategy Tip

Guaranteed 12-16 marks. Master your calculator! Learn the 'GT' and compound interest M+/M- tricks to solve annuity questions in 10 seconds without writing long formulas.

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